UK FTSE 100 (.FTSE) index is down 23%. Is now the time to buy shares?

UK FTSE 100 (.FTSE) index is down 23%. Is now the time to buy shares?

UK FTSE 100 (.FTSE) index is down 23%. Is now the time to buy shares?

The FTSE 100 index has traditionally been thought to contain the UK’s safest equity investments. But yearto-date, its value has fallen 23%. The coronavirus pandemic has created an unprecedented shift in global economies, initiating major volatility in financial markets.

Increase stock exposure, limit risk

So does that mean Footsie investing is now a big risk? Well, one way to invest directly in the FTSE 100 index is to choose an index tracker fund. This allows you to own a basket of stocks, rather than just a few, creating diversification and lowering risk. Index funds are popular with beginners to stock market investing because they’re simple to understand and affordable.

There are many funds to choose from, which invest in companies from a specific sector, market theme or index. The FTSE 100 index makes a popular choice for beginners because it gives investors access to ownership of the UK’s largest 100 companies with limited risk. The FTSE 100 is home to well-known British names such as BTBAE SystemsBarclaysTesco and Vodafone.

Why choose a FTSE 100 index tracker fund?

Sectors thriving in the lockdown are proving a popular choice for themed index fund investments. These include the FMCG, pharmaceutical and IT sectors. However, this also means they’re priced at a premium. I think a diversified fund is a better option for beginners. This includes a FTSE 100 index tracker fund.

Index funds are subject to the ups and downs of the financial markets, but by being invested in multiple stocks, across a range of sectors, you dilute your risk. 

Is this a good time to buy shares?

Among the market fluctuations, many leading-edge companies have shed a fortune from their market capitalisation. Some of these had over-inflated share prices that were due a correction. Others are now unfairly in bargain-basement territory.

The trouble with some favourite companies in the FTSE 100 index is that their dividends were the main driving force behind shareholder investment. Particularly for long-term income investors. Many of these companies have cancelled their dividends for 2020, meaning they’re no longer as attractive to investors.

However, many of them are still great companies and by cutting their dividends they’ll survive the pandemic.

If you do your homework and look for companies that can survive and thrive, then this could be a great time to buy shares. Key points to look for include management integrity, a manageable level of debt, and the likelihood it will overcome the pandemic and grow.

Billionaire investor Warren Buffett sometimes uses a price-to-earnings ratio (P/E) to gauge if a stock is priced fairly. The general rule is a P/E of less than 10 could be a value play. However, too low a P/E could mean the company carries risks. The P/E is not a deciding factor, but it’s a useful metric to check when evaluating a company’s stock price.

The ups and downs of stock market investing can be nerve-wracking, particularly during periods of extreme volatility. Try to look at the bigger picture. Investing is a long-term game that benefits those that last the distance. Hold your nerve, stay calm, don’t panic and be confident in the shares you purchase.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 6,107.30.

The projected lower bound is: 5,018.85.

The projected closing price is: 5,563.08.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 67.7975. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.88. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 14 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 29. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 13 period(s) ago.

Rex Takasugi – TD Profile

FTSE 100 INDEX closed down -193.660 at 5,597.650. Volume was 36% above average (neutral) and Bollinger Bands were 3% wider than normal.

Open High Low Close Volume___
5,791.3105,791.7105,576.3505,597.6501,375,971,328
Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 5,621.84 6,316.21 7,107.29
Volatility: 45 60 33
Volume: 1,360,031,488 1,305,544,448 857,647,680

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FTSE 100 INDEX is currently 21.2% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of .FTSE at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .FTSE and have had this outlook for the last 2 periods.

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